POLICY BRIEF

POLICY ISSUE: ACCOUNTABILITY MECHANISMS IN THE IMPLEMENTATION OF CONDITIONAL CASH TRANSFER PROGRAM (4Ps PANTAWID PAMILYANG PILIPINO PROGRAM)

I.

EXECUTIVE SUMMARY

The Pantawid Pamilyang Pilipino Program provides cash transfers to poor households, conditional upon investments in child education and health as well as use of maternal health services. The objective of the program is to promote investments in the education and health of children to help break the intergenerational transmission of poverty, while providing immediate financial support to the household. Poor households are identified by the National Household Targeting System for Poverty Reduction (NHTS-PR) based on a transparent poverty targeting mechanism, using a statistical model to estimate income. Households with estimated income below the poverty line are classified as poor. From that database of poor households, Pantawid Pamilya identifies and selects eligible households who have children 0-14 years of age and/or a pregnant woman. These households then receive cash grants every two months ranging from PhP 500 to PhP 1,400 per household per month, depending on the number of eligible children. Nevertheless, there are a number of risk factors or challenges associated to this project such as how incentives can be properly aligned with institutions to ensure effective performance; lack of appropriate tool updates; lack of reliable information and making precise cash payments on time. In view thereof, this policy brief proposes the adoption of accountability mechanisms in the implementation of Conditional Cash Transfer Program (4Ps, Pantawid Pamilyang Pilipino Program). Thus, I greatly recommend the exercise of improved management information system (MIS) to facilitate flow of reliable and accurate information in all the stages of 4Ps implementation with corresponding regular conduct of spot checks and effective management strategy as also hereby proposed.

II.

PROBLEM/ISSUE STATEMENT

The 4Ps has encountered a number of implementation challenges that impact on service delivery and open opportunities for error, fraud and corruption. A process risk mapping by the World Bank identified decision -

points where program implementers both at the national and sub-national level have high-degree of discretion. With wide latitude for discretion, the potential for leakage can be significant. Clearly, this casts serious doubts on the institutional capacity of DSWD and its partners and the readiness of the systems to implement the 4Ps on such a scale. The areas/activities where issues are mostly likely to emerge are: targeting/registration of beneficiaries, payment system and monitoring of the compliance of conditions. Equally important is the institutional design/arrangements, as well as organizational capacity, to service delivery. It is noteworthy that defining the lines of authority and responsibility is the take-off point for ensuring an adequate accountability framework. The implementation issues are the following: Defining lines of responsibility and assigning incentives. The multi-sectoral nature and the decentralized service delivery of the 4Ps program require the coordination of multiple institutions across levels and properly aligning incentives to service providers. A key concern in this area is how incentives can be properly aligned with institutions to ensure effective performance. For example, local governments may not necessarily comply with their administrative/operational responsibility in the 4Ps, e.g. supply side provisions, without the incentives to do so. LGUs may consider this as a burden which they may or may not comply with. Or, if LGUs are given significant discretion in determining eligibility, there is a tendency to enrol as many people as possible. Apart from excessive enrolment, LGUs can also exercise political discretion among borderline cases for rent-seeking purposes. Discretion can introduce risks of corruption and political influence into the registration process. Targeting Beneficiaries. Methodological issues in the NHTS appear to contribute to significant exclusion errors (that is the non-inclusion of eligible households). Note that the poorest municipalities and cities in the provinces were selected based on the 2003 Small Area Poverty estimates. Only those with poverty incidence greater than or equal to 36.99% are included in the screening process. The NHTS suffers from the lack of appropriate tool updates. The use of the 2003 Small Area Poverty estimates as part of the targeting instrument has been criticized as out of date after a few years of crisis and/or rapid economic change. The regular update of PMT is highly desired because the level of household consumption is expected to change more quickly across time than multi-dimensional poverty indicators. Otherwise, this will leave many more

families who did not registerbut are equally poor and vulnerableout of the system. Compliance to conditionalities. Compliance rate of 4Ps conditionalities has been generally high for the pilot years. However, with the rapid expansion of the 4Ps, the roll-out of the computerized compliance verification system (CVS) has delay issues which could affect the timely transfer of payments to beneficiaries, as well as the enforcement of sanctions for noncompliance. The lack of reliable information clearly impedes establishing a meaningful relationship between the conditions and payments through the enforcement of sanctions. Unless the CVS becomes fully operational, the payment system cannot make the precise calculations of the amount to be paid to each family or suspend payment due to non-compliance. Benefit Payments. Making precise cash payments on time is another major challenge of the 4Ps for specific reasons. One, payments require very accurate payroll and this entails adequate data entry applications from the programs management information system. Discrepancies in data from the registration process and CVS have already resulted in double payments to beneficiaries, payment to non-compliant beneficiaries and delays in disbursements. There were instances, as reported by the Philippine Center for Investigative Journalism, that beneficiary households received one-year lump sum grants, including the 10-months when they were not yet CCT eligible, as their first payout. Other families with three children reportedly receive less than the amount, while others received P15,000 despite having less than three children. Second, beneficiary households usually live in remote or poor areas where banks have very little or no presence. The lack of automated teller machines in these areas presents a risk in the programs implementation, including illegal charges of officials for certain services. To address the issue of access, the 4Ps must pursue systems of mixed payments that can be adapted to the conditions and circumstances of the geographical area where the payments are made. On this note, the DSWD has partnered with Globe Telecoms to use GCASH Remit as another means to distribute cash transfers to beneficiaries in distant areas.

III.

BACKGROUND OF THE STUDY

Despite a modicum of economic growth (average 4 percent) over the past decade, the Philippines has not seen a reduction in the poverty rate. In this

regard, the Philippines is an outlier in the region, which has experienced a rapid decline in poverty. According to the latest available poverty data from the 2009 poverty estimates from the Family Income and Expenditure Survey (FIES), the Philippines is home to around 23.1 million poor people. This figure is equivalent to over a quarter of the countrys total population. To help address this issue, the Government launched a conditional cash transfer (CCT) program called the Pantawid Pamilyang Pilipino Program (or Pantawid Pamilya), which has become the cornerstone of the Governments social protection efforts. The program provides cash transfers to supplement the income of poor households in selected municipalities, subject to their compliance with conditionalities related to education and health. The program was launched in February 2008 with 6,000 household beneficiaries in four pilot municipalities and two cities. Since then, the program has been scaled up rapidly, covering approximately 3 million households by May 2012. As of 2011, Pantawid Pamilya accounted for half of the Governments expenditures on national social protection programs, equivalent to 1.64% of total government spending net of debt financing (World Bank, forthcoming). The overall objective of this CCT program is to help poor households with short-term consumption needs, while promoting investments in the education and health of their children to help break the intergenerational transmission of poverty. The specific objectives of the program are to: (i) keep children in school, (ii) keep children healthy, and (iii) invest in the future of children. The program has been an important part of a renewed effort to address chronic poverty and meet the MDGs to eradicate extreme poverty and hunger, achieve universal primary education, promote gender equality, reduce child mortality, and improve maternal health (DSWD, 2009), with the premise that poverty is multidimensional and not just about income alone. It embodies the Governments commitment to promoting inclusive growth by investing in human capital to improve education and health outcomes for poor children and pregnant women. Furthermore, beneficiaries for Pantawid Pamilya are selected through a combination of geographical targeting and the proxy means testing (PMT) method, known as the National Household Targeting System for Poverty Reduction (NHTS-PR). Once program municipalities are defined, beneficiary households are selected through the PMT. The PMT, centrally designed in 2007 and implemented starting in 2008 by DSWD, predicts household income using observable and verifiable variables that are highly correlated with household income. Relevant variables for the PMT model were selected based on an analysis of two household surveys in the Philippines, the Family Income and Expenditure Survey (FIES) and Labor Force Survey (LFS) of 2003. Through NHTS-PR, households are categorized as poor if the predicted income is below the official provincial poverty threshold (Fernandez, 2012). Among the poor households in program areas, eligible households

those with a pregnant mother at the time of the Household Assessment by NHTS-PR and/or children between 0-14 years of ageare invited to enroll in the program by attending the community assembly. Beneficiary households must comply with specific health and education conditionalities in order to receive cash transfers through the program. The conditionalities, applicable to poor households with children 0-14 years of age or pregnant women, as well as the corresponding transfers are as follows: - Health Grants. The health grant is aimed at promoting healthy practices, improving the nutritional status of young children, and increasing the use of health services. Poor households with children 0-14 years old and/or pregnant women receive a lump sum amount of PhP 500 per household per month. Households must fulfill the following conditions for the health transfer: (i) all children under the age of five follow the Department of Health (DOH) protocol by visiting the health center or rural health unit regularly; (ii) pregnant women attend the health center or rural health unit according to DOH protocol; (iii) all school-aged children (6-14 years old) comply with the de-worming protocol at schools; and (iv) for households with children 0-14 years old, the household grantee (mother) and/or spouse shall attend Family Development Sessions at least once a month. - Education Grants. The education grant is aimed at improving school attendance of children 6-14 years old living in poor households in selected areas. The education transfer is PhP 300 per child per month (for a period of 10 months/year), for up to a maximum of three children. Beneficiary households receive the education transfer for each child as long as they are enrolled in primary or secondary school and attend 85% of the school days every month. Moreover, Modified Conditional Cash Tranfer (MCCT) Program is an offshoot of the Regular CCT. This has been proposed to give social assistance to the households who are not covered in regular program but are still considered to be below poverty threshold. Also, this has been developed for those household who were delisted because they are no longer 0-14 yrs. old but with 15-17 yrs.old However, the 4Ps has encountered a number of implementation challenges or issues, such as: defining lines of responsibility and assigning inecentives; targeting beneficiaries; compliance to conditionalities and benefit payments.

IV.

SIGNIFICANCE OF THE ISSUE

In the scale up of the 4Ps program, there are implementation issues that urgently need government attention so as to mitigate the risks of error, fraud and corruption. These issues, however, are not insurmountable, as shown by experiences of other countries. It is important to realize that CCTs are not a universal remedy to poverty yet it has the potential to increase human capital formation while providing a lifeline cash transfer to the very poor to meet their survival needs. As such, it can be an important tool to help bridge the gap in achieving the Millennium Development Goals, i.e. reduce poverty, achieve universal primary education and improve maternal health, where the country lags behind. Early assessment of the program has shown that the program has the potential to achieve this as shown by good compliance rates of beneficiary households on education and health conditions. All of these, however, depend on the efficient delivery of services within the program. The DSWD should therefore ensure the effective implementation of the program by putting in place accountability mechanisms to achieve the expected goals. By doing so, the Pantawid Pamilyang Pilipino Program or 4Ps may serve as a blueprint for more targeted social protection programs of the government.

V.

PRE-EXISTING POLICIES

According to 2006 Annual Poverty Statistics of the National Statistical Coordination Board, 27.9 Million Filipinos or one-third (l/3) of the entire population are poor. To deal with this problem the Department of Social Welfare and Development (DSWD) together implemented a Conditional Cash Transfer Program known as Pantawid Pamilyang Pilipino Program (4Ps) inspired by the successes of similar programs in Latin American countries such as Bolsa Familia in Brazil, Familias en Accion in Colombia and OPORTUNIDADES in Mexico. DSWDs Convergence Strategy will have a more implementation of its programs aside from 4Ps, namely: harmonized

a. Kapit-bisig Laban sa Kahirapan Comprehensive and Integrated Delivery of Social Services (KALAHI-CIDSS) - It provides funding for community-driven infrastructure projects such as school buildings, health centers, farm-to-market roads, foot bridges, and water systems, among others. In 2012, KALAHI-CIDSS expanded its coverage to reach up to 50 percent of the poorest municipalities in targeted provinces, utilizing the Additional Financing (AF) of the World

Bank (WB) and a grant from the United States Millennium Challenge Corporation (MCC). To date, the project covers a total of 328 municipalities in 48 poorest provinces in the country. b. Sustainable Livelihood Program (SLP) - It extends capital assistance and capability building to beneficiaries to start their own income generating projects. As part of the Convergence Strategy, Pantawid Pamilya beneficiaries who are graduating from the program may avail of the SLP. Overall, program implementation is being managed by the DSWD together with an advisory committee composed of representatives from the departments of education and health, the oversight agencies, coordinating agencies, Department of Interior and Local Government (DILG) and local government units. Under Joint Memorandum Circulars 1 and 2 of 2009 and 2011, respectively, the roles and responsibilities of each of the agencies were identified to ensure availability of supply on health and education needed for the implementation of the program.

VI.

POLICY ALTERNATIVES WITH ITS PROS AND CONS 1. Improved management information system (MIS) to facilitate flow of reliable and accurate information in all the stages of 4Ps implementation. The information requirement of the internal monitoring system of the 4Ps which covers all aspects of the implementation process from registration of beneficiaries, verification of compliance to payment systemis being handled by a computerized management information system. In effect, the MIS ensures that every beneficiary household meets all the eligibility criteria and is receiving the right amount of cash grant depending on its current status and compliance with program conditionalities. While an effective MIS can be a key instrument for accountability in the CCT program, it can also be an additional source of risk for potential errors, political manipulation, service interruption, and fraud. These types of problems can be lessened by implementing several strategies on data quality and database management such as: The size of targeting errors can be decreased through the use of good information management practices that focus on data quality

(cross-checking with official sources, automatic detection of duplications, etc.). Improved monitoring of compliance requires ex-ante and ex-post mitigation strategies such as introduction of financial incentives to improve data recording by focal persons and cross-checking data (e.g. manually in paper-based programs and automatically in electronic programs); spot checks based on unusual results (e.g. if hours attended exceed hours of school); and implementation of automated checks for inconsistencies.

2. Conduct regular spot checks to determine quality, effectiveness and efficiency of the program and detect short-term issues with respect to the program cycle. In the case of 4Ps, spot checks are conducted twice a year by a third party. Program staff interview participants, program officials, and local government staff using structured questionnaires covering 400 indicators of critical program aspects including enrolment, verification of compliance with conditionalities, payment, appeals, and participation in and quality of health education sessions. 3. Design effective communication strategy to broaden awareness and sustain public and political support. Misconceptions about the 4Ps have been rooted from lack of awareness and knowledge about its design and features. Chief among them is that the 4Ps is a dole-out rather than a development program. The communication strategy must be able to impress upon the public the soundness of the technical design and rules of the 4Ps, especially in the targeting and selection process. This will reinforce the credibility of the program, as well as of the participating institutions, and minimize perception of political capture of the process.

VII.

RECOMMENDATION

With the aforesaid practical alternatives, I greatly suggest the exercise of improved management information system (MIS) to expedite flow of reliable and accurate information in all the stages of 4Ps implementation with corresponding regular conduct of spot checks and effective management strategy as also hereby proposed. This procedure could mitigate the risk factors associated with CCT Program through the following ways:

a. Decrease the size of the targeting errors by employing good information management practices that focus on data quality i. cross-checking with official sources ii. automatic detection of duplications b. Improve monitoring of compliance requiring ex-ante and ex-post mitigation strategies i. introduction of financial incentives to improve data recording by focal persons and cross-checking data (e.g. manually in paper-based programs and automatically in electronic programs) ii. spot checks based on unusual results (e.g. if hours attended exceed hours of school); and iii. implementation of automated checks for inconsistencies. MIS makes it certain that every beneficiary household meets all the eligibility criteria and is receiving the right amount of cash grant depending on its current status and compliance with program conditionalities. Finally, there is a need to mobilize coordinated support from the LGUs, DOH and DepEd to ensure prompt response to supply-side gaps and effective resolution of grievances.

Prepared by:

ANNA CAMILLE C. FABILA BSBA FTM 3-1

References/Sources Consulted Chaudhury, N., & Okamura, Y. (2012). Conditional Cash Transfers and School Enrollent: Impact of the Conditional Cash Transfer Program in the Philippines. Philippines Social Protection Note No. 6. Fernandez, L. (2012). Design and Implementation Features of the National Household Targeting System in the Philippnes. World Bank, Philippines Social Protection Note 5. Fernandez, L., & Olfindo, R. (2011). Overview of the Philippines' Conditional Cash Transfer Program: The Pantawid Pamilyang Pilipino Program. World Bank Philippine Social Protection Note 2. Fiszbein, A., Schady, N., Ferreira, F. H., Grosh, M., Kelleher, N., Olinto, P., et al. (2009). Conditional Cash Transfers: Reducing Present and Future Poverty. Grosh, M., Ninno, C., Tesliuc, E., & Ouerghi, A. (2008). For Protection and Promotion: The Design and Implementation of Effective Safety Nets. Manasan, R. (2011). Pantawid Pamilyang Pilipino Program and School Attendance: Early Indications of Success. PIDS PN 2011-19. Department of Social Welfare and Development. Pantawid Pamilyang Pilipino Program Briefer. Available online at http://pantawid.dswd.gov.ph/index.php/about-us?start=2 Retrieved December 27, 2011. Hoddinott, J. and L. Bassett. November 2008. Conditional Cash Transfer Programs and Nutrition in Latin America: Assessment of Impacts and Strategies for Improvement. Available online at http://ssrn.com/abstract=1305326 Retrieved February 22, 2012. Leonardo, D. Department of Social Welfare and Development Officer, Ferrol, Romblon. (phone interview, March 4, 2013) Diola, I. Department of Social Welfare and Development, Ferrol, Romblon, Municipal Link. (phone interview, March 6, 2013)

APPENDICES

APPENDIX I

Figure 1. Flow of Activities under the Compliance Verification System

APPENDIX II

Figure 2. 4Ps Program Cycle

APPENDIX III

Table 1. Performance of Municipalities/Cities with CCT on meeting Department of Health Benchmark Standards (as of November 2010)

APPENDIX IV

Table 2. Performance of Elementary School vis a vis Department of Education Standards in CCT-Covered Areas (as of November 2010)